Question 1

How much house can I afford?

Accepted Answer

Most US lenders follow the 28/36 rule: keep your total monthly housing cost (principal, interest, property taxes, homeowners insurance, PMI, and HOA fees) at or below 28% of your gross monthly income, and keep all combined monthly debt payments—including auto loans, student loans, and credit cards—under 36% of gross income.

Question 2

How much down payment do I need?

Accepted Answer

While putting 20% down avoids private mortgage insurance (PMI) on a conventional loan, many US homebuyers put down less. Conventional loans allow as little as 3% down for qualified first-time buyers, FHA loans require at least 3.5% with a 580+ credit score, and VA or USDA loans may offer 0% down for eligible service members or rural buyers.

Question 3

What is a good mortgage interest rate?

Accepted Answer

A good mortgage interest rate compares favorably against national Freddie Mac Primary Mortgage Market Survey averages for your loan term and credit profile. Borrowers with FICO scores of 740 or higher, lower loan-to-value ratios, and shorter 15-year terms generally qualify for the lowest available rates.

Question 4

Does this mortgage estimator include property taxes?

Accepted Answer

Yes. You can enter your estimated annual property taxes, and the Mortgage Estimator divides that amount by 12 to include monthly escrow taxes alongside homeowners insurance, PMI, and HOA fees in your total monthly housing cost.

Question 5

What is PMI and when does it go away?

Accepted Answer

Private Mortgage Insurance (PMI) is required by conventional lenders when your down payment is below 20% of the purchase price. Under the federal Homeowners Protection Act, you can request PMI cancellation once your loan-to-value ratio reaches 80% of the original home value, and lenders must automatically terminate it at 78% LTV.

Question 6

How can I lower my monthly mortgage payment?

Accepted Answer

You can lower your monthly payment by increasing your down payment to shrink the loan balance and eliminate PMI, improving your credit score before applying, choosing a 30-year term over a 15-year term, shopping Loan Estimates across at least three lenders, or buying down your rate with discount points.

Question 7

What is typically included in US closing costs?

Accepted Answer

Closing costs in the United States typically range from 2% to 5% of the home purchase price. They include lender origination fees, home appraisal and credit report charges, title search and title insurance, attorney or settlement fees, recording taxes, and prepaid escrow deposits for property taxes and homeowners insurance.

Question 8

How does my credit score affect my mortgage payment?

Accepted Answer

Lenders use risk-based pricing tiers tied to your FICO score. Even a 0.50% to 1.00% difference in APR between a 640 score and a 760+ score can add hundreds of dollars per month and tens of thousands of dollars in extra interest over a 30-year fixed mortgage.

Question 9

Should I pay mortgage discount points at closing?

Accepted Answer

One discount point costs 1% of your loan amount upfront and typically lowers your mortgage rate by about 0.25%. Paying points makes financial sense if you plan to keep the loan longer than your break-even period—usually 4 to 6 years—rather than selling or refinancing early.

Question 10

Can I pay extra toward principal without a penalty?

Accepted Answer

Nearly all standard US conventional, FHA, and VA fixed-rate residential mortgages have no prepayment penalty. Applying even $100 to $250 extra toward principal each month directly reduces your balance and can shave several years and tens of thousands of dollars in interest off a 30-year loan.

Mortgage Calculation Methodology & US Standards

1. Standard Fixed-Rate Amortization Formula

2. Worked Numerical Example

3. Escrow, PMI & Extra Principal Payments